Jitters Over Oil Hit Dow

NEW YORK — Fear that the bargain in oil prices may end soon unsettled Wall Street Friday, sending stock prices sharply lower and producing a record weekly loss in the Dow Jones industrial average.

With a 27.18-point drop Friday, to 1,739.22, the Dow industrials lost 82.50 points for the week.

Particularly hit were airlines and other transportation stocks, which tend to benefit the most from lower fuel costs. The Dow transportation index fell a record 21.34 points Friday, to 779.32.

``The psychology in the last three or four trading days has changed dramatically,`` said Jack Baker, head trader at Shearson Lehman Brothers. ``If oil prices are, in fact, going higher, then there is no chance for an additional rally right now in the bond or stock markets.``

Stock prices had been climbing at a breakneck pace since the beginning of the year as big and small investors alike celebrated declining interest rates and the reduced inflation brought about by dramatically lower fuel costs.

But, for a number of reasons, oil prices recovered this week, and Wall Street quickly began a correction that many experts have been expecting for some time.

That decline, in only moderately heavy trading, was far worse than the previous record drop of 59.08 points in the week ended Oct. 20, 1978. In percentage terms, however, the 1978 selloff was much worse since the Dow ended that week at only 838.01.

Ignored Friday was a report that unemployment fell a little in March, after jumping in February. Signs of a weak economy generally lower interest rates and lift stocks. But stock prices were down the entire day, and selling pressure intensified in the afternoon when some arbitrage-related trading programs were kicked off.

GAF fell $3.37 to $64.25. It owns a major stake in Union Carbide, down 12.5 cents Friday to $20.75. Investors are nervous about the proposed sale of Carbide`s consumer business. Bids were to be delivered by this week, but so far no announcement has been made.